Eni and Repsol to Receive Oil-for-Debt Licenses, Venezuela Welcomes ‘Small Steps’

President Nicolás Maduro stated that recent concessions to oil companies represent “small but significant steps” towards sanctions relief.

Caracas, June 6, 2022 (venezuelanalysis.com) – The US government has reportedly greenlighted two companies to ship Venezuelan oil to Europe as soon as next month.

According to anonymous sources consulted by Reuters on Sunday, the Biden administration has sent letters to Italy’s Eni and Spain’s Repsol stating that Washington would “not object” if the energy firms resumed oil-for-debt swap deals with Venezuela’s state oil company PDVSA in order to send crude cargoes to Europe.

In the letters reportedly sent last month, Washington pledged that the two European companies would not face penalties for taking Venezuelan oil to collect on pending debts owed by PDVSA under the condition that the crude “has to go to Europe” and “cannot be resold elsewhere.”

One of the sources claimed that Washington aims to help Europe address looming fuel shortages amidst skyrocketing global energy prices following the European Union’s embargo on most Russian oil imports. The new sanctions package was imposed in response to the US’ pressure campaign to economically punish Moscow for the Ukraine conflict.

Washington is likewise looking to redirect Venezuelan oil shipments from China to Europe in order to cut off Caracas’ income from its Asian ally, which currently buys some 70 percent of Venezuela’s oil production, the unnamed US officials claimed.

The White House and the Venezuelan government have not issued official statements regarding the alleged authorizations while Eni and Repsol have declined to confirm the reports. The Italian firm stated it could not comment “on issues of potential commercial sensitivity.”

Foreign companies were forced to gradually abandon operations in Venezuela following the 2017 financial sanctions against PDVSA, the 2019 oil embargo and subsequent secondary sanctions. As a result, the country’s crude output went from 1.9 million barrels per day (bpd) to less than 500,000 bpd in 2020, severely exacerbating an ongoing economic crisis.

With PDVSA cut off from the international banking system several corporations, including Eni and Repsol, had reached oil-for-debt swap agreements with Caracas but these were shut down by the former Trump government in mid-2020.

The two corporations hold stakes in several oil and natural gas projects in the South American country. While crude extraction ventures wound down, the Cardón IV company, co-owned by Eni and Repsol, produced a reported 284 million cubic feet per day of natural gas in 2021. It was not made clear whether the European enterprises would be allowed to resume crude-for-fuel swaps as well.

Last year, US oil giant Chevron began pressuring the Biden administration into lifting the ban on swap deals by highlighting that these were cash-free transactions, with several European firms later joining the lobbying efforts.

Following the sanctions on Russian oil, the corporations’ demands were finally taken into consideration inside the White House. On May 17, the US Treasury Department authorized Chevron and European firms to negotiate with PDVSA “the terms of potential future activities in Venezuela.”

But despite being the lead negotiator, Chevron was reportedly not included in the new oil-for-debt deals concessions granted by Washington to Eni and Repsol. On May 27, the California-based company’s current license was only renewed to continue to carry out essential work to preserve its four joint oil ventures in Venezuela.

For its part, the Venezuelan government has seen the recent measures as good signs of future, broader sanctions relief. According to President Maduro, the recent “small steps” taken by the Biden administration stem from the early March meeting between a high-level US delegation and the Venezuelan mandatary in Caracas.

“[Following the March 5 meeting], a series of steps have been taken, sometimes slow, very slow, sometimes less slow,” said Maduro on Saturday during an interview with Argentine sociologist and writer Atilio Borón. He added that there has been “permanent communication” between his administration and the White House since then.

Maduro stressed that the US greenlighting Chevron, Eni and Repsol “to start the processes that will lead them to produce oil and gas in Venezuela in order to export to their markets” represent “small but significant steps.”

Nonetheless, the Venezuelan mandatary reaffirmed that while these light measures were welcomed Caracas would continue to demand “the lifting of all the cruel and criminal sanctions” levied against the country’s economic sectors.

“This is a permanent demand but we cannot expect this to happen overnight,” he emphasized adding that the country has embarked on the road of economic recovery through “its own efforts.”

In turn, Washington has said that any significant sanctions relief would be conditioned on the resumption of the dialogue process between the Maduro government and the US-backed opposition in Mexico. US officials have stated that Biden expects political concessions for the right-wing sector regarding the 2024 presidential election.

Edited by Ricardo Vaz in Caracas.